NEWCARDIO, INC.
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (the "Agreement")
is made and entered into as of November 1, 2007 by and between
NewCardio, Inc., a Delaware corporation (the
"Company"), and Branislav Vajdie (the "Executive").
BACKGROUND
A.
The
Company desires to retain the services of the Executive as the
Chief Executive Officer of the Company from the date of this
Agreement (the "Effective
Date"). The Company also desires to provide employment
security to the Executive, thereby inducing the Executive to
continue employment with the Company and enhancing the Executive's
ability to perform effectively.
B.
The
Executive is willing to be employed by the Company on the terms and
subject to the conditions set forth in this Agreement.
THE
PARTIES AGREE AS FOLLOWS:
1.
Title, Duties and
Responsibilities.
1.1
Title.
The Executive will be employed by the Company as its Chief
Executive Officer, at the pleasure of the Board of Directors
of the Company (the "
Board"). For so long as Executive remains the Chief
Executive Officer of the Company, the Company shall use
commercially reasonable efforts to nominate Executive for
membership on the Board at each annual meeting of the stockholders
of the Company, or at any meeting of the stockholders of the
Company at which members of the Board are to be elected, or
whenever members of the Board are to be elected by written consent,
subject in each case to the approval of the Company's stockholders
and/or the Board, as applicable.
1.2
Duties.
The Executive will devote all of the Executive's business
time, energy, and skill to the affairs of the Company;
provided, however, that reasonable time for the activities set
forth on Exhibit
A, personal business, charitable or professional
activities or such other activities which shall be approved in
advance by the Board will he
permitted, in any case so long as such activities do not
materially interfere with the Executive's performance of
services under this Agreement.
1.3
Performance
of Duties. The Executive will discharge the duties
described herein and duties as set forth by the Board from
time to time, in a diligent and professional manner. The
Executive will report to the Board, and will further comply
with the Company's business policies, rules and regulations,
as adopted from time to time by the Board.
2. Terms of
Employment.
2.l For
purposes of this Agreement, the following terms will have
the following meanings:
(a)
"Accrued Compensation" means any accrued Total Cash
Compensation,
any benefits under any plan of the Company in which the Executive
is a participant to the full extent of the Executive's rights under
such plans, any accrued vacation pay, and any appropriate business
expenses incurred by the Executive in connection with the
performance of the Executive's duties hereunder, all to the extent
unpaid on the date of termination.
(b)
"Base Salary" will have the meaning set forth in Section
3.1 hereof.
(c)
"Change of Control' means the occurrence of any one of
the following:
(i) any "person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
" Exchange
Act") (other than the Company, a subsidiary, an affiliate,
or a Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Company representing 50% or more of
the combined voting power of the Company's then outstanding
securities; or (ii) a sale of all or substantially all of the
assets of the Company; or (iii) any merger, reorganization or other
transaction of the Company whether or not another entity is the
survivor, pursuant in which holders of all the shares of capital
stock of the Company outstanding prior to the transaction hold, as
a group, less than 50% of the shares of capital stock of the
Company outstanding after the transaction; provided, however, that
neither (A) a merger effected exclusively for the purpose of
changing the domicile of the Corporation in which the holders of
all the shares of capital stock of the Company immediately prior to
the merger hold the voting power of the surviving entity following
the merger in the same relative amounts with substantially the same
rights, preferences and privileges, nor (B) a transaction the
primary purpose of which is to raise capital for the Company, nor
(C) a reverse merger involving a publicly traded entity and the
Company during such time the Company is a privately-held entity
(the
"Reverse Merger"), will constitute a Change of
Control.
(d)
"Death Termination" means termination of the
Executive's employment
due to the death of the Executive.
(e)
"Disability Termination" means termination of the
Executive's employment
by the Company due to the Executive's incapacitation due to
disability. The Executive will be deemed to be incapacitated due to
disability if at the end of any month the Executive is unable to
perform substantially all of the Executive's duties under this
Agreement in the normal and regular manner due to illness, injury
or mental or physical incapacity, and has been unable so to perform
for either (i) three consecutive full calendar months then ending,
or (ii) 90 or more of the normal working days during the 12
consecutive full calendar months then ending. Nothing in this
paragraph will alter the Company's obligations under applicable
law, which
may, in certain circumstances, result in the suspension or
alteration of the foregoing time periods.
(f)
"PIPE
Financing" means the Company's first sale and issuance
of restricted
securities to a third party investor following the closing of
the Reverse Merger during the term hereof.
(g)
"Termination For Cause" means termination of the
Executive's employment
by the Company due to (i) the Executive's dishonesty or fraud,
gross negligence in the performance of the Executive's duties and
responsibilities; (ii) the Executive's conviction of a felony
involving moral turpitude; (iii) the Executive's incurable material
breach of the terms of this Agreement or the Confidentiality
Agreement (as defined below); or (iv) the willful and continued
refusal by Executive to substantially perform Executive's duties or
responsibilities for the Company described herein and as set forth
by the Board from time to time.
(h)
"Termination Other Than For Cause" means termination of
the Executive's
employment by the Company due to any reason other than as specified
in Sections 2.1(d), (e), or (g) hereof.
(i)
"Total Cash Compensation" means the Executive's Base
Salary plus
any cash bonuses, commissions or similar payment accrued during the
preceding calendar year, and if there is no complete preceding
calendar year, then the preceding 12 month period, and if there is
no complete preceding 12 month period, then the preceding
employment period annualized to a twelve (12) month
period.
(j)
"Voluntary Termination" means termination of the
Executive's employment
by the voluntary action of the Executive, other than by reason of a
Disability Termination or a Death Termination or as described in
2.1(k).
(k)
"
Voluntary
Resignation
for Good Reason" means Executives voluntary
resignation of Executive's employment with the Company within
thirty (30) days following the expiration of any Company cure
period (discussed below) following the occurrence of one or
more of the following, without Executive's consent: (i) the
assignment to Executive of any authority, duties, or
responsibilities, or the reduction of Executive's authority,
duties, or responsibilities, either of which results in a
material diminution of Executive's authority, duties, or
responsibilities with the Company in effect immediately prior
to such assignment, or the removal of Executive from
Executive's authority, duties, or responsibilities with the
Company in effect immediately prior to such removal; provided,
however, that the Company's hiring of a new Chief Executive
Officer following the date hereof (and removal of Executive
from such office) and reassignment of Executive to a Vice
President level or superior position or executive office of
the Company (with a corresponding reduction in authority,
duties, or responsibilities based on such title change) will
not constitute "Good Reason" hereunder; (ii) a material
reduction of Executive's Base Salary (in other words, a
reduction of more than ten percent of Executive's Base Salary
in any one year); (iii) a material change in the geographic
location at which Executive must perform services (in other
words, the relocation of Executive to a facility that is more
than fifty (50) miles from Executive's current location); and
(iv) the failure of the Company to
obtain assumption of this Agreement by any successor.
Executive will not resipt for Good Reason without first
providing the Company with written notice of the acts or
omissions constituting the grounds for "Good Reason" within
ninety (90) days of the initial existence of the grounds for
"Good Reason" and a reasonable cure period of not less than
thirty (30) days following the date of such
notice.
2.2
Employee at Will. The
Executive is an "at will" employee of the Company,
and the Executive's employment may be terminated by the
Company at any time by giving the Executive written notice
thereof, subject to the terms and conditions of this Agreement
and the At-Will Employment, Confidential Information,
Invention Assignment and Arbitration Agreement attached as
Exhibit
B hereto (the " Confidentiality Agreement "
),
the terms of
which are herein incorporated by reference.
2.3
Termination For Cause. Upon
a Termination For Cause, the Company will
pay the Executive Accrued Compensation, if any.
2.4
Termination Other Than For Cause
. The Company shall give Executive not
less than three (3) months advance notice of a Termination
Other Than For Cause. Upon a Termination Other Than For Cause,
and provided Executive executes and delivers to the Company a
release and waiver of claims in the form attached hereto as
Exhibit
C and such release and waiver of claims is not revoked
and has become effective pursuant to its terms, the Company
will pay the Executive (a) Accrued Compensation, if any, and
(b) a monthly cash severance payment equal to (x) the Total
Cash Compensation, divided by twelve (12), times (y) thirty
three (33) months, minus the number of whole months elapsing
during the period beginning with the date of this Agreement
and ending on the effective termination date of Executive's
employment, with any fractional month prorated based on the
number of days so elapsed divided by the total number of days
in such calendar month (the result of (y),
the "Other
Than For
Cause Severance Period"). For certainty, in no event
shall the Other Than For Cause Severance Period exceed thirty
three (33) months.
2.5
Voluntary Resignation For Good
Reason. Upon
a Voluntary Resignation For
Good Reason, and provided Executive executes and delivers to
the Company a release and waiver of claims in the form
attached hereto as Exhibit
C and such release and waiver of claims is not revoked
and has become effective pursuant to its terms, the Company
will pay the Executive (a) Accrued Compensation, if any,
and
(b) a monthly cash severance payment equal to (x) the Total
Cash Compensation, divided by twelve (12), times (y) thirty
six (36) months, minus the number of whole months elapsing
during the period beginning with the date of this Agreement
and ending on the effective termination date of Executive's
employment, with any fractional month prorated based on the
number of days so elapsed divided by the total number
of
days in such calendar month (the result of (y), the
"Good Reason
Severance Period"). For certainty, in no event shall
the Good Reason Severance Period exceed thirty six (36)
months.
2.6
Disability
Termination. The Company will have the right to effect
a Disability
Termination by giving written notice thereof to the Executive.
Upon a Disability Termination, the Company will pay the
Executive all Accrued Compensation, if any.
2.7
Death
Termination. Upon a Death Termination, the
Executive's employment
will he deemed to have terminated as of the last day of the
month during which her death occurs, and the Company will
promptly pay to the Executive's estate Accrued Compensation,
if any.
2.8
Voluntary
Termination. In the event the Executive wishes
to
consummate a Voluntary Termination, the Executive shall give the
Company at least thirty (30) days advance written
notice. During such period, the Executive will
continue to receive regularly scheduled Base Salary payments
and benefits. Following the effective date of a Voluntary
Termination, the
Company will pay the Executive Accrued Compensation, if
any.
2.9 Timing of
Termination Payments. Unless expressly provided
otherwise, the
foregoing termination payments will be made at the usual and agreed
times provided for in Section 3.1 of this Agreement.
3. Compensation
and Benefits.
3.1
Base
Salary. As payment for the services to be rendered by
the Executive as
provided in Section 1 and subject to the provisions of Section
2 of this Agreement, the Company will pay the Executive a
"Base Salary" at the rate of $290,000 per year, payable on the
Company's normal payroll schedule. The Executive's "Base
Salary" may be increased in accordance with the provisions
hereof or as otherwise determined from time to time, but
reviewed at least annually, by the Compensation Committee of
the Board.
3.2
Additional
Benefits.
(a)
Benefit Plans. The Executive will be eligible to participate
in such of
the Company's benefit plans as are now generally available or later
made generally available to senior officers of the Company,
including, without limitation, medical, dental, life, and
disability insurance plans.
(b)
Expense Reimbursement. The Company ogees to reimburse
the Executive
for all reasonable, ordinary and necessary travel and entertainment
expenses incurred by the Executive in conjunction with the Executive's services
to the Company consistent with the Company's standard reimbursement
policies. The Company will pay travel costs incurred by the
Executive in conjunction with the Executive's services to the
Company consistent with the Company's standard travel
policies.
(c)
Vacation.
The Executive will be entitled, without loss of
compensation,
to twenty (20) days of vacation per year. Unused vacation in
any given year may be accrued by the Executive pursuant to the
Company's standard vacation policies.
3.3
Bonus.
(a)
Mandatory.
As soon as practicable following the closing of the
PIPE
Financing, the Company shall pay Executive a one time, lump sum
cash bonus in the amount of (x)
$24,166.67, times the number of whole months elapsing
during the period beginning
April 1, 2007 and ending on the closing date of the PIPE
Financing, with any fractional month prorated based on the
number of days so elapsed divided by the total number of days
in such calendar month, minus (y) the total amount of cash
compensation paid to Executive by the Company during the
period beginning April 1, 2007 and ending on the closing date
of the PIPE Financing, which bonus shall be subject to normal
withholdings.
(b)
Other.
The Executive will be entitled to participate in any
management
bonus plan adopted by the Company on terms comparable to other
senior officers of the Company, which may include the
following:
(i) 2007
Program. In the event the PIPE Financing is closed
during
calendar year
2007, then Executive may be entitled to a one time, lump sum cash
bonus payment, payable upon the first payroll date following
December 31, 2007 in accordance with the Company's normal payroll
procedures, in an amount equal to 0% to 37.5% of Executive's Base
Salary as of December 31, 2007, with such final percentage
determined by the Board based upon Executive's and/or the Company's
achievement by December 31, 2007 of the following
milestones:
|
Milestone
|
Percentage of then Base Salary
|
|
(1)
Closinof a PIPE Financing
|
|
|
(A)
Closing
of a PIPE Financing at a pre-money Company valuation of $20M but
less than $25M; or
|
5%;
or
|
|
(B)
Closing
of a PIPE Financing at a pre-money Company valuation of greater
than $25M
|
10%
|
|
(2)
Completion of new QTinno studies involving at least 5,000
ECGs
|
4%
|
|
(3)
Identification,
interviewing of, and proposal of at least two (2) qualified
candidates for the position of Chief Financial Officer of the
Company either full or part time
|
8%
|
|
(4)
Identification,
interviewing of, and proposal of at least two (2) qualified
candidates for membership on the Board
|
8%
|
|
(5)
Submission of a detailed financial and investor relations plan
for calendar year 2008
|
7.5%
|
|
TOTAL
|
37.5%
|
(ii)
2008
Program. Provided the PIPE Financing has closed
prior to or during calendar year 2007, then Executive may be
entitled to a
one time, lump
sum cash
bonus payment, payable upon the first payroll date following
December 31, 2008 in accordance with the Company's
normal payroll procedures, in an amount equal to 0%
to 50.0% of
Executive's Base Salary as of December 31, 2008, with such final
percentage determined by the Board based upon
Executive's achievement by December 31, 2008 of certain milestones
to be
determined by the Board and Executive as soon as practicable
following the later to occur of the date of closing of the PIPE
Financing and January 1. 2008.
3.4
Option to Purchase common
Stock. Promptly following the Effective
Date,
the senior management of the Company will recommend that the
Board grant the Executive an option (the " Option ") to purchase
1,000,000 shares of the Company's Common Stock pursuant to the
Company's 2004 Equity Incentive Plan (the " Plan ") at an exercise price
per share equal to the fair market value of a share of the
Company's Common Stock as
of the date of such grant, as determined by the Board, and
subject to the following vesting schedule: 1/36 of the shares
subject to the Option shall vest on each monthly anniversary
of the date of this Agreement,
subject to Executive's Continuous Service (as defined in the
Plan) through each such date. Notwithstanding the above, the
Option will vest immediately with respect to 100% of any then
unvested or unreleased shares upon a Termination Other Than
For Cause.
3.5
Future Options . Any
other equity award made to Executive following the
Effective
Date in
addition to the Option which is subject to vesting or
forfeiture (each such equity award, a " Future Option ") shall also
vest immediately with respect to 100% of any then unvcsted or
unreleased shares upon a Termination Other Than For
Cause.
4.
Miscellaneous.
4.1 Waiver . The waiver of the breach of any
provision of this Agreement will
not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
4.2
Notices . All notices and
other communications under this Agreement will
be
in writing and will be given by personal or courier delivery,
facsimile or first class mail, certified or registered with
return receipt requested, and will be deemed to have been duly
given upon receipt if personally delivered or delivered by
courier, on the date of transmission if transmitted by
facsimile, or three business days after mailing if mailed, to
the addresses of the Company and the Executive contained in
the records of the Company at the
time of such notice. Any party may change such party's address
for notices by notice duly given pursuant to this Section
4.2.
4.3 Headings . The section headings
used in this Agreement are intended for convenience
of reference and will not by themselves determine the construction
or interpretation of any provision of this Agreement.
4.4 Governing Law. This Agreement will be governed
by and construed in
accordance
with the laws of the State of California, excluding those laws that
direct the application of the laws of another
jurisdiction.
4.5
Survival of Obligations.
This Agreement will be binding upon and inure
to
the benefit of the executors, administrators, heirs,
successors, and assigns of the parties; provided, however,
that except as herein expressly provided, this
Agreement will not be assignable
either by the Company (except to an affiliate or successor of
the Company) or by the Executive without the prior written
consent of the other party.
4.6
Counterparts and Facsimile Signatures. This Agreement may
be executed
in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument. This Agreement may be executed by facsimile
signature (including signatures in Adobe PDF or similar
format).
4.7
Withholding. All sums payable to the Executive hereunder
will be reduced
by all federal, state, local, and other withholdings and similar
taxes and payments required by applicable law.
4.8
Enforcement. If any portion of this Agreement is determined
to be invalid or
unenforceable, such portion will be adjusted, rather than voided,
to achieve the intent of the parties to
the extent possible, and the remainder will be enforced to the
maximum extent possible.
4.9
Entire Agreement; Modifications. Except as otherwise
provided herein or
in the exhibits hereto, this Agreement and all exhibits hereto
represents the entire understanding among the parties with respect
to the subject matter of this Agreement, and supersedes any and all
prior and contemporaneous understandings, agreements, plans, and
negotiations, whether written or oral, with respect to the subject
matter hereof, including, without limitation, any understandings,
agreements, or obligations respecting any past or future
compensation, bonuses, reimbursements, or other payments to the
Executive from the Company. All modifications to the Agreement must
be in writing and signed by each of the parties hereto. The Company
and Executive acknowledge that upon the execution of this
Agreement, the Consulting Agreement dated March 1, 2007, as amended,
between the parties is hereby terminated, save for any surviving
obligations of the parties set forth therein, and Executive hereby
waives any notice requirements in connection therewith; provided,
however, that to the extent any provision of this Agreement or the
Confidentiality Agreement conflicts with a surviving obligation of
the Consulting Agreement, the provision set forth in this Agreement
and/or the Confidentiality Agreement shall control.
4.10 Section
409A.
(a)
Notwithstanding anything to the contrary in this Agreement,
if Executive
is a "specified employee" within the meaning of Section 409A
of the Internal Revenue Code of 1986, as amended (the
"Code") and the final regulations and any guidance
promulgated thereunder
("Section 409A") at the time of Executive's termination, and
the severance payable to Executive, if any, pursuant to this
Agreement, when considered together with any other severance
payments or separation ben
